Bitcoin Falls On Global Regulatory Concerns

Hello traders everywhere. The January Bitcoin (CME:BRTI) selloff gained momentum on Tuesday when the cryptocurrency dropped as much as 13% in early trading as the prospect of global regulatory crackdowns appeared to spread.

A South Korean news website Yonhap reported that Finance Minister Kim Dong-yeon had told a local radio station that the government would be coming up with a set of measures to clamp down on the "irrational" cryptocurrency investment craze.

South Korea said on Monday that its plans to ban virtual coin exchanges had not yet been finalized, as government agencies were still in talks to decide how to regulate the market.

That news broke just as a report surfaced that a senior Chinese central banker had said authorities should ban centralized trading of virtual currencies and prohibit individuals and businesses from providing related services.

China shut down exchanges operating on the mainland last year - a move that also sparked a selloff.

The January selloff has seen Bitcoin (CME:BRTI) fall 42% from it's December 2017 high of 19,528.87.

I have private keys that correspond to addresses on the blockchain that had value transferred to them. If you wish to be inaccurate, the value corresponds to clamshells or tulip bulbs. If you want to be accurate, the value is part of a finite supply of credits from an algorithm. Someone decides to fork the chain and spend credits on the new fork. Every time that happens I get more credits, I don't have to lift a finger. On the other hand it is not a productive investment, but simply a store of value that expands for now.

Someone can also create an entirely new chain, convince kids (yes teens) to mine it, then offer their new credits at an exchange. I can go to any exchange and offer some of my original bitcoin credits or forked credits for their credits. I'll be keeping those on new private keys. I would have preferred my original credits were had not been valued much more than $1,000 but I'm ok at $1,000 or $10,000. Turns out many buyers are price insensitive because they have no use for their fiat. Turns out many hodlers bought at ridiculously low prices and don't need the money either. It's just a temporary store of value until the next new CC.

Let's contrast that simple, evolving and creative market with credit default swaps. In that scheme you were allowed to sell insurance against default of borrowers without sufficient capital to pay the defaults. You were able to do this because you got to tranche the debt and sell the premium payment streams to other "investors" to raise the capital (which was still insufficient) I am saying "you" to mean the people that ran Wall St before 2010. There is clearly much more systemic risk with a system based on debt than a system based on perceived store of value of a rare digital item.

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